There is only one directory in the prepare folder as its moved out of this folder when the cronjob ends.

When the prepare is carried out i get the following output message stating that the MySQL database wasnt shutdown correctly and something wrong with the log files.

"InnoDB: The log sequence number in ibdata files does not match
InnoDB: the log sequence number in the ib_logfiles!
110324 12:24:23 InnoDB: Database was not shut down normally!
InnoDB: Starting crash recovery."

I've uploaded the backup and prepare logs. Is this the right way of doing things?

[notice (again)]
If you use binary log and don't use any hack of group commit,
the binary log position seems to be:
InnoDB: Last MySQL binlog file position 0 17886101, file name /var/log/mysql/mysql-bin.000082

Comment

I have checked your attachments but it seems blank files for me. Can you again upload the files?

If your issue is that you are seeing "Crash Recovery" in the output message then It's normal behavior while preparing backup. Because --apply-log is a crash recovery process itself, that how it works, it starts the crash recovery process to apply the redo logs copied during the backup in order to get a clean backup